Impact Private Equity

We have written on the micro-finance area of the capital markets and how this mechanism can achieve two major goals. The first is to achieve solid financial returns on an absolute and risk adjusted basis while adding diversification to a portfolio, and the other is to enact definitive societal change at the micro level.

In the case of Root Capital the goal is to seed finance the poor farming concerns in developing countries. The rate of return is reasonably high while the default rate is reasonably low which is appealing for investors and at the same the initiative provides for a higher standard of living for the indigenous population.

That is only one example within one silo of the exciting world of impact investments and represents the very micro financing level. What occurs if we move up the capital level?

While there are many level within finance, private equity could arguably be another arrow within an investors quiver. One firm, DBL Investors out of San Francisco, CA connects innovative companies with investors through a two fold approach.

“DBL Investors assists its port­fo­lio com­pa­nies in achiev­ing a “dou­ble bot­tom line”: that is, strong long-​​term finan­cial suc­cess as well as pos­i­tive social, envi­ron­men­tal and eco­nomic impact in the local com­mu­nity. We have found that dou­ble bot­tom line prac­tices that com­pa­nies choose to adopt can be sig­nif­i­cantly ben­e­fi­cial to the fis­cal bot­tom line both via direct ben­e­fits of cost sav­ings and value cre­ation, and via indi­rect ben­e­fits of cre­at­ing good­will with their mar­ket, cus­tomers and com­mu­nity, and enhanc­ing employee morale and retention.”

The diversification is impressive as they make investments mainly across Clean Tech, Health Care, Information Technology, and Sustainability-Oriented Products and Services. We believe these will become powerful drivers in the decades ahead as the consumer and investors driven by financial AND ideologically based platforms.

The opportunity set for investors continues to expand beyond the traditional asset allocation models and this can serve two major purposes. The first is to attain the financial results within a portfolio that will allow for growth and diversification through a more robust opportunity set not available within the basic framework.

Secondly, it allows investors to finance forward looking, dynamic companies that have the potential for healthful societal change AND to profit.

We continue to be excited about the exciting changes to the capital markets and the potential for investors.

Sincerely,

Tom Koehler-CIO

“Socially Responsible Investments represent a complex asset class and while we covered a small amount, there is a lot more information needed prior to making an investment decision. Let us know if we can provide more information to help in that process.”